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The European Central Bank (ECB) published an opinion on a proposal for a Council Decision on
the conclusion of the Agreement on the withdrawal of the UK and Northern Ireland from the EU and the European Atomic Energy Community (the Withdrawal Agreement). The opinion follows a request from the Council of the European Union for an opinion on
a proposal for a Council Decision on the conclusion of the Withdrawal Agreement (referred to in the opinion as the ‘proposed Decision’). The opinion takes note of the proposed Decision, which approves the Withdrawal Agreement. In particular,
the ECB takes note of the provisions of the Withdrawal Agreement on the reimbursement of the paid-in capital provided by the Bank of England (BoE) to the ECB, and the participation of the BoE in the institutional arrangements laid down in Articles
282 and 283 TFEU and the Statute of the European System of Central Banks and the European Central Bank during the transition period.
The Treasury Committee published a letter sent by Nicky Morgan, Chair of the Committee to the Economic Secretary to the Treasury,
John Glen, and his response concerning the evidence Mr Glen gave to the Committee on the Financial Services and Markets Act
2000 (Amendment) (EU Exit) Regulations 2019 (the FSMA SI). In Ms Morgan’s letter, she noted that given the wide range of powers that are being delegated to the BoE, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority
(FCA) (the Regulators), the Committee felt it was important and necessary that Parliament could scrutinise these additional powers properly. Ms Morgan’s letter also requested further information on Equivalence Determinations for Financial Services
and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019 (Equivalence SI). Mr Glen’s response focused on the Equivalence SI.
On 13 February 2019, chair of the European Securities and Markets Authority (ESMA), Steven Maijoor, gave a speech on ‘Brexit—the regulatory challenges’ at the European Financial Forum 2019 in Dublin, Ireland. Focusing on ESMA's preparations for a no-deal Brexit across a number of
areas, including secondary markets, clearing and settlement and cooperation agreements, Mr. Maijoor noted that following Brexit, Europe’s biggest capital market will be moved outside of the EU. He also stated that because the EU27 and UK capital
markets are very interconnected, this would be a major operation. According to Mr. Maijoor, carving out the UK capital market requires preparations for all circumstances, by all participants concerned, including the possibility of a no deal Brexit.
The UK Parliament is seeking views
on the Financial Services (Implementation of Legislation) [Lords] Bill (the Bill), which is currently passing through Parliament. It published on its website a request for members of the public with relevant expertise and experience or a special interest
in the Bill to submit their views in writing to the House of Commons Public Bill Committee, which will be considering the Bill. The Bill enables the Treasury to make corresponding or similar provisions in UK law to upcoming EU financial services legislation
in the event that the UK leaves the European Union without a deal. The Bill is now at Second Reading stage in
the House of Commons.
The House of Lords EU Financial Affairs Sub-Committee announced that it will explore the future of Brexit and central counterparties (CCPs) in a one-off evidence session on 13 February 2019 with witnesses from the London Clearing House (LCH) Group and the Futures
Industry Association (FIA). Likely questions include:
The Australian Securities and Investments Commission (ASIC) says that it is carefully monitoring developments related to Brexit and is liaising closely with the FCA, the BoE, other Australian financial authorities and the ASIC’s regulated stakeholders
to identify and plan for potential Brexit-related impacts. This includes contingency planning in the event that the UK leaves the EU in a ‘no deal’ scenario. In a media release, ASIC Commissioner Sean Hughes said that ASIC’s aim is to limit disruption to Australian financial services and markets. ASIC will continue to monitor developments post-Brexit as
intended and unintended consequences become apparent.
The International Swaps and Derivatives Association (ISDA) sent a letter to
ESMA and the European Commission on 12 February 2019, commenting on the proposed technical standards on Brexit-related novations. ISDA welcomed the standards that seek to give relief from the margining and clearing requirements to over the counter
(OTC) derivative contracts that are transferred (novated) from a UK to an EU counterparty. However, ISDA noted the fact that the relief is contingent on the event of a no-deal Brexit makes it operationally difficult for firms to enter into agreements
to novate contracts.
The International Capital Market Association (ICMA) published a briefing note which summarises the key points in ESMA’s statement on the use of UK data in ESMA databases and the performance of MiFID II calculations under a no-deal Brexit
with regard to bond markets. ESMA’s statement aims to inform stakeholders on the approach it will take on all ESMA IT applications and databases.
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SI 2019/192: This enactment is made in exercise of legislative powers under the European Union (Withdrawal) Act 2018 (EU(W)A
2018) in preparation for Brexit. This enactment makes minor and technical changes to pieces of UK primary and subordinate legislation in the field of occupational and personal pension schemes to ensure retained EU law continues to operate effectively,
and to address other deficiencies arising from the withdrawal of the UK from the EU. Part 2 amends primary legislation, Part 3 amends secondary legislation, and Part 4 revokes secondary legislation. It comes into force on exit day (Updated from draft
on 8 February 2019). The Occupational and Personal Pension Schemes (Amendment etc) (Northern Ireland) (EU Exit) Regulations 2019 were
also updated from draft on 8 February 2019.
SI 2019/Draft: This draft enactment is laid in exercise of legislative powers under the EU(W)A 2018 in preparation
for Brexit. This draft enactment proposes to amend UK subordinate legislation in relation to financial services in order to address deficiencies in domestic legislation and retained EU law, arising from the withdrawal of the UK from the EU. Through
amendments to existing UK and EU exit legislation, this instrument ensures that relevant matters in relation to Gibraltar can be treated as they were before exit day to support continued passporting for authorised financial services firms between
UK and Gibraltar after exit day.
The updated draft Financial Services (Miscellaneous)
(Amendment) (EU Exit) Regulations 2019 published by HM Treasury on 12 February 2019 makes minor amendments to the previous draft published on 5 February 2019 (format changes and an amendment to remove the reference to ‘exit day’ in relation
to the Credit Institutions and Insurance Undertakings Reorganisation and Winding Up (Amendment) (EU Exit) Regulations 2019). The SI addresses deficiencies in UK domestic law and retained EU law arising from the UK’s withdrawal from the EU in
line with the approach taken in other financial services EU exit instruments under the EU (Withdrawal) Act 2018 (EUWA). Additionally the SI also revokes a number of pieces of retained EU law and UK domestic law which would be inappropriate to keep
on the statute book after exit as they deal with cross-border activity in the EU and the functioning of EU institutions.
On 9 January 2019, HM Treasury published the draft Public Record, Disclosure of Information and Co-operation (Financial Services) (Amendment) (EU Exit) Regulations 2019 together with explanatory information. On 12 February 2019, a correction slip to
the draft SI was published. The amendments renumber paragraphs and change some of the references to EU legislation to ‘relevant directives’ and ‘relevant provisions’. The SI’s purpose is to make amendments to domestic
legislation and retained EU law relating to the disclosure of confidential information to ensure that the legal framework can operate effectively in a UK context once the UK leaves the EU, in any scenario.
The Commons European Statutory Instruments Committee (ESIC) and the Lords Secondary Legislation Scrutiny Committee (SLSC) are responsible for the sifting process under the EU(W)A 2018. These committees scrutinise proposed negative Brexit SIs and
make recommendations on the appropriate parliamentary procedure before the instruments are laid in Parliament. This bulletin outlines the latest updates and recommendations, collated on 8 February 2019. The following Brexit SIs were noted to be of
interest by SLSC Sub-Committee A and Sub-Committee B:
The FCA published Primary Market Bulletin No. 20, which contains guidance
consultation 19/1 (GC19/1), which consults on changes that the FCA is proposing to make to the Knowledge Base, and finalised guidance 19/1 (FG19/1), which sets new and amended guidance in relation to the Knowledge Base. The Knowledge Base is the FCA's
repository of non-handbook commentary that enjoys the status of formal FCA guidance. It consists of a series of short procedural and technical notes published in PDF format and ordered by topic. The notes relate to aspects of the Listing Rules, Prospectus
Rules and Disclosure Guidance and Transparency Rules.
On 13 February 2019, the PRA published Policy
Statement (PS 3/19) to provide feedback to responses to Consultation Paper (CP 28/18) ‘PRA fees and levies: Changes to periodic and transaction fees’. PS 3/19 is relevant to all PRA-regulated firms, but particularly insurers and designated
investment firms, as well as firms which applying, or intending to apply in the future for, Solvency II or Capital Requirements Regulation (CRR) models. The PRA received four responses to the CP. The feedback to these responses is set out in Chapter
2 of PS 3/19. The implementation date for the ‘PRA Fees Amendment Instrument 2019’ and the updated SS3/16 ‘Fees: PRA approach and application’ is Friday 1 March 2019.
The FCA published a series of step-by-step video guides to help claims management companies
(CMCs) find out what they need to do to get ready for FCA regulation. The FCA will become the regulator of CMCs on 1 April 2019. The FCA published three video guides on the following topics:
The European Commission published a call for advice, in which it invites
each of the European Supervisory Authorities (ESAs) to develop a report presenting the evidence and possible advice on potential undue short-term pressure on corporations. The ESAs are expected to assess the extent to which short-termism is present
and can be considered problematic. The ESAs should investigate potential sources of such pressure on corporates stemming from the financial sector. If evidence reveals significant issues, the Commission also invites the ESAs to assess whether these
issues could be addressed by regulators and to provide advice on areas which regulators should address.
The Council of the EU published an update on progress of EU financial services legislative
files. The update lists the legislative files, the date of first presentation by the Commission and the current state of play. The note provides an update on a number of important legislative proposals including:
Draft letters from the President of the European Council addressed to the President of the European Parliament and to the President of the ECB respectively, were published by the Council in order to approve the appointment of a member of the executive board of the ECB. The Council Recommendation (5940/19) and the CV of Mr Philip R. Lane are to be enclosed
in the letters. Mr Lane currently serves as the Governor of the Irish Central Bank and was also recently nominated to serve as the next Chief Economist of the ECB.
ESMA published its Risk Assessment Work Programme, providing
an overview of the analytical, research, data and statistical activities that ESMA will carry out in 2019. The 2019 Risk Assessment Work Programme is one of ESMA's activity reporting documents, the others are the Regulatory Work Programme, the Supervisory
Work Programme and the Supervisory Convergence Work Programme. Also, ESMA is preparing for any changes to its analytical and statistical framework that may need to be made when the UK leaves the EU.
The Romanian Presidency of the Council of the EU called on the Council to agree on its general approach on
the European Commission’s entire package of legislative proposals regarding the European System of Financial Supervision (ESFS) and to invite the Presidency to start, as soon as possible, negotiations with the European Parliament on the basis
of the complete ESFS mandate with a view to reaching an agreement at first reading. On 20 September 2017, the Commission presented its package of legislative proposals on the ESFS. An anti-money laundering (AML) component was further added by the
Commission to this legislative package with a proposal issued on 12 September 2018. On 19 December 2018, the Permanent Representatives Committee (Coreper) agreed on a partial mandate for negotiations on the AML component, while leaving the remainder
of the ESFS file for continued discussion in the Council.
The Council of the EU confirmed its position on proposals to review the functioning of the current ESFS, inviting the Romanian presidency to start negotiations with the European Parliament as soon as possible. Following
this confirmation of the Council’s general approach, both co-legislators are now ready to start trilogue negotiations on the basis of the complete ESFS mandate, and the first trilogue is scheduled to take place on 14 February 2019. The Council
was examining the proposals at a technical level since October 2017, and its position published today clarifies a number of issues such as the Council’s desire to generally preserve the existing system of contributions coming partly from the
EU budget and partly from national competent authorities.
The House of Commons European Scrutiny Committee published its 54th report,
in which it summarises its review and conclusions of EU documents considered by the Committee on 6 February 2019. Documents considered include the Commission’s proposed changes to the ESFS. The Committee considered the ongoing review of the
ESFS and concluded that it is directly relevant to the UK financial services industry both before and after the UK leaves the EU. Given the potential implications of the proposals for the UK, the Committee welcomed the indications that the Member
States at least want to significantly alter some of the more far-reaching elements of the original Commission proposal.
The Financial Stability Board (FSB) published its work programme for 2019, setting out its
planned work and an indicative timetable of its main publications for 2019. The FSB’s focus was on shifting from post-crisis policy design to implementing and evaluating the effects of the reforms and monitoring vigilantly any new and emerging
risks to financial stability, and this change is reflected in the 2019 work programme. The FSB’s main areas of work for 2019 are (1) addressing new and emerging vulnerabilities in the financial system (2) finalising and operationalising post-crisis
reforms (3) implementation of reforms, and (4) evaluating the effects of the reforms.
TheCityUK appointed Mark Tucker, Group Chairman of HSBC, as the new Chairman
of its Board, succeeding John McFarlane, who will step down on 31 May 2019. Mark Tucker, Chairman Designate, TheCityUK, said "I am very pleased to succeed John and to have the opportunity to lead TheCityUK Board at such an important time for the industry.
We are facing a period of transformation driven by changing international relationships and technology and we must work together to secure the future of the UK’s international competitiveness".
The FCA published a new video
in which senior leaders from four financial services firms, together employing over half a million staff, talk about their experiences of adopting the Senior Managers and Certification Regime (SM&CR). The SM&CR aims to increase individual
accountability within financial services and is a key step to improve culture and governance in the sector. It was first adopted by the banking sector in 2016 and by insurers in December 2018. The FCA will be extending the SM&CR to around 47,000
solo-regulated firms in December 2019.
The Personal Investment Management and Financial Advice Association (PIMFA) launched its inaugural Wealth of Diversity Conference. The conference, sponsored by EY, addressed key initiatives to promote diversity and inclusion, and gave insights into best practice for promoting
culture and diversity in the workplace. The day was opened by keynote speaker John Glen MP, UK Economic Secretary to the Treasury and City Minister, who highlighted the importance of diversity and inclusion and reemphasised the government's commitment
to these issues.
The European Systemic Risk Board (ESRB) issued a press release on its recommendation
for the EU-wide reciprocation of France’s 5% large exposure limit for exposures of systemically important institutions (SIIs) to highly indebted large non-financial corporations having their registered office in France. This recommendation was
adopted by the ESRB on 5 December 2018 and published in the Official Journal of the EU on 1 February 2019. The ESRB’s recommendation seeks to ensure that France’s 5% large exposure limit applies not only to exposures of SIIs authorised
in France, but also to exposures of SIIs authorised in other EU Member States. It thereby enhances the effectiveness and consistency of macroprudential policy in the EU and contributes to a level playing field in the Single Market.
The government published two letters sent by Kelly Tolhurst, Minister for Small Business, Consumers and Responsibility, to the European Union Committee and the European Scrutiny Committee regarding
progress of EU negotiations on the proposed Directive on whistleblowing. In the letters, the government gives an update on the negotiations and its views on the proposed text, and addresses questions raised by the European Union Committee. In updating
the Committees on the negotiations, the government confirms that the proposed Directive progressed rapidly through negotiations in working parties, and on 25 January 2019, the Presidency was granted a mandate to proceed with trilogues with the European
Parliament. The Presidency indicated that it intends to hold a formal vote for a General Approach at the Justice and Home Affairs Council meeting on 7-8 March 2019.
An employment tribunal in London ordered Royal Bank of Canada
(RBC) to pay a former currency trader around £1.2m ($1.3m) after he was found to be unfairly dismissed for repeatedly making complaints about the lender's compliance culture. The tribunal's decision, which was made available on 4 February, said
that John Banerjee, who lost his job after blowing the whistle on alleged lapses in RBC's compliance procedures at the Toronto-based bank's London operation, should be compensated around £1.2m to cover lost earnings. The former foreign exchange
trader earned £280,000 a year, including a bonus, when he lost his job in 2016, court documents show. Judge James Tayler, who sat on the tribunal, based his decision to award £1.2m on the calculation that Banerjee would retire as a trader
at RBC in 2021.
The Global Financial Markets Association (GFMA) published its Financial Data Handling Principles for Banks
and Non-Banks, a set of voluntary principles drawn from international best practices. The principles are based on the US National Institute of Standards and Technology Cybersecurity Framework and the EU’s General Data Protection Regulation (GDPR).
On 13 February 2019, the Commission adopted a new list of 23 third countries with strategic deficiencies
in their AML and anti-terrorist financing (ATF) frameworks. As a result of the listing, banks and other entities covered by EU AML rules will be required to apply due diligence on financial operations involving customers and financial institutions
from these high-risk third countries to identify any suspicious money flows. A new methodology, which reflects the stricter criteria of the Fifth Anti-Money Laundering Directive in force since July 2018, was used to create the list following an
The European Parliament and the Council of the EU reached a political agreement on the European Commission’s proposal to facilitate cross-border access to financial information by law enforcement authorities, to ensure timely access to the necessary
information to prevent and investigate terrorism and other serious crime. The agreement was welcomed by
the European Commission, which proposed the new measures in April 2018. The agreed measures will complement the existing Fourth Money Laundering Directive, which was designed to strengthen the EU’s defences against money laundering and terrorist
The European Parliament published a
press release noting that a delegation of MEPs from the European Parliament's special committee on financial crime, tax evasion and tax avoidance concluded its Estonian leg of its fact-finding mission. In Estonia, the delegation met with journalists,
national authorities and representatives of Danske Bank Estonia, the branch responsible for the bulk of the money laundering scandal Danske Bank is currently faced with. The delegation now moves on to Denmark to continue its investigations there.
On 13 February 2019, the Treasury Committee took evidence from UK Finance, Santander UK and Nationwide Building Society as part of its inquiry into economic crime. Before the evidence session, the Committee published a letter from the
Financial Ombudsman Service (FOS), part of which focusses on economic crime. Caroline Wayman, Chief Ombudsman and Chief Executive of the FOS, says in the letter that the FOS received 8,500 complaints about fraud and scams in 2017/18, and already
received over 10,000 new cases this financial year.
Organised crime groups led by married couples or families are running pension scams worth millions of pounds, according to intelligence gathered by members of the multi-agency Project Bloom group, which was set up to tackle pension scams. Criminal investigations involving regulators, government agencies and police
forces are currently ongoing into a number of these gangs. In addition, a number of individuals linked to the scams are being suspended or banned from acting as trustees and companies used for scams are being shut down.
British investigators seized more than £466,000 ($601,000) from three frozen bank accounts belonging to the son of a jailed former Moldovan Prime Minister, the National Crime Agency (NCA) said, after suspecting that the funds originated from
a $1bn money laundering scandal. Vlad Luca Filat, 22, was stripped of nearly half a million pounds after Judge Michael Snow granted forfeiture orders on his accounts during a hearing at the City of London Magistrates Court. Judge Snow agreed with
NCA that the money was likely connected to the disappearance of $1bn from three Moldovan banks in 2014 for which his father is serving nine years in jail. ‘I am satisfied on the balance of probabilities that the cash was derived from his father's
criminal conduct in Moldova’ Judge Snow said.
The FCA updated its webpage on its discussion
paper on a duty of care for financial services firms and potential alternative approaches (DP18/5) on 5 February 2019 by adding a new ‘next steps’ section to the webpage. The FCA published DP18/5 in July 2018, alongside a document
setting out its approach to consumers (see Legal update, FCA approach to consumers and discussion paper on a new duty of care). DP18/5 closed to responses in November 2018.
The FCA published a direction regarding a modification by consent
of a rule in its Supervision manual (SUP) for employers’ liability register compliance reporting. The modification relates to SUP 16.23A.6, which applies to firms which are required to produce an employers’ liability register in compliance
with the requirements in ICOBS 8.4.4R of the FCA Handbook.
The Competition & Markets Authority (CMA) gave notice of
its intention to make the Investment Consultancy and Fiduciary Management Market Investigation Order 2019 (the Order) and published a draft of the Order and a draft Explanatory Note. Representations on the draft Order and Explanatory Note should be in writing and should reach the CMA by 10 a.m on Wednesday 13 March 2019. The CMA published its findings in the Investment
Consultants Market Investigation Final Report published on 12 December 2018. The Final Report set out the CMA’s findings that there are features of the markets for Investment Consultancy Services and Fiduciary Management Service, which individually
and in any combination adversely affect competition in connection with the supply and acquisition of those services in the UK to and by pension schemes. The CMA decided on a package of remedies to be implemented by it in order to remedy, mitigate
or prevent the adverse effects on competition that it found and the detrimental effect on customers that may be expected to result—the Order will give effect to these remedies.
The FSB published responses
to its discussion paper on proposed financial resources to support CCP resolution and the treatment of CCP equity in resolution. The consultation was launched on 15 November 2018 and closed on 1 February 2019. The FSB concluded in 2018 that further
guidance on the necessary financial resources should be developed in an evidence-based way including by drawing on the practical experience gained from resolution planning by relevant authorities and crisis management groups. The FSB expects to
publish further guidance for public consultation in 2020.
The European Money Markets Institute (EMMI) published a
summary of stakeholder feedback received to its second consultation paper on a hybrid methodology for EURIBOR, along with a blueprint of the methodology. The consultation presented EMMI’s findings from its hybrid EURIBOR testing phase to
test its proposed hybrid methodology for EURIBOR. The consultation period closed on 30 November 2018 and EMMI says the responses showed ‘broad support’ for its proposals. This was EMMI’s second consultation on its proposed hybrid
methodology for EURIBOR and is part of EMMI’s commitment to deliver a reformed and robust methodology for EURIBOR, which aims to meet regulatory and stakeholder expectations in a timely manner.
The FCA published a speech given by Julia Hoggett, director
of market oversight at the FCA, at the Association for Financial Markets in Europe (AFME) ‘Implementation of the Market Abuse Regulation in the UK’ event, London. The speech focused on some of the specific issues that the FCA is concerned
about in relation to market abuse. The speech also aimed to help frame how market participants should think about the risk of market abuse taking place and add some colour to recent FCA publications on the subject in Market Watch. During her speech,
Ms Hoggett touched on the FCA’s five conduct questions approach. The approach serves as a conduct risk mitigation framework that is increasingly used across FCA Wholesale Supervision and which helps regulated firms enhance the manner in
which they conduct business.
The City of London Law Society (CLLS) published its Regulatory Law Committee’s response to FCA consultation 18/38 (CP18/38)
on restricting contract for difference (CFD) products sold to retail clients. The response recommends that the proposed definition of ‘restricted option’ set out in CP18/38 should be reconsidered, as it contains some significant elements
of uncertainty and risks capturing unintended targets and missing some intended targets. In its response, the CLLS highlights the significant impact of the product intervention proposals in respect of CFD-like options, which means that the proposed
definition of ‘restricted option’ must be as certain as possible.
The European Commission adopted a Delegated Regulation amending Delegated Regulation
(EU) 2017/588 as regards the possibility to adjust the average daily number of transactions for a share where the trading venue with the highest turnover of that share is located outside of the EU. Article 49 of MiFID II obliges trading venues
to adopt tick size rules for shares, depositary receipts, certain exchange traded funds, certificates and similar financial instruments. Tick sizes should be calibrated to reflect the liquidity of the financial instrument in the markets where
the instrument is traded. The tick size needs to be determined for each financial instrument individually. Article 49(3) of MiFID II requires ESMA to develop draft regulatory technical standards to further specify tick sizes or tick size regimes
for the instruments mentioned above.
ESMA announced it decided to
delay the publication of the double volume cap (DVC) data foreseen for 7 February 2019 due to a technical issue with the DVC system. Instead this publication is planned for 15 February 2019. As set forth in Article 5 of MiFIR, the DVC mechanism
aims to limit the trading under the reference price waiver and the negotiated transaction waiver for liquid instruments in an equity instrument. ESMA regularly publishes DVC data on its website. The latest update was published on 9 January 2019.
The Tax Incentivised Savings Association (TISA) published an updated version of its MiFID II implementation
guide for costs and charges disclosures. The new version includes guidance to clarify the standards and methodologies when completing the ex post section of the European MiFID template, as well as guidance on ex post cumulative effect of charges
on returns. TISA is a cross-industry body with over 200 member firms from all areas of UK financial services. Produced to assist asset management and distribution firms, its guide sets out a comprehensive, industry-wide approach to the practical
aspects of implementing the costs and charges provisions of MiFID II, including suggested templates.
The ESAs published their final recommendations
following a consultation on targeted amendments to Commission Delegated Regulation (EU) 2017/653 covering the rules for the key information document (KID) for packaged retail and insurance-based investment products (PRIIPs). The ESA
decided not to propose targeted amendments at this stage, but to undertake a more comprehensive revision of the PRIIPs Delegated Regulation in the course of 2019. The ESAs reached their decision taking into account the feedback on their consultation
and considering in particular the implications of a possible decision by the European co-legislators to defer the application of the KID by certain types of investment funds beyond 2020.
ESMA published a document listing the
thresholds below which an offer of securities to the public does not need a prospectus in the various EU Member States under the Prospectus Regulation (EU) 2017/1129. ESMA drew up this document to create transparency around the regimes adopted
across the EU. The Prospectus Regulation introduces a new threshold below which an offer does not require a prospectus. This threshold is €1m. Member States may decide to raise that threshold to a maximum of €8m, provided that an offer
will not be passported to another Member State.
IOSCO published a report which sets out good or sound practices to assist relevant storage infrastructures
and their oversight bodies to identify and address issues that could influence the pricing of commodity derivatives and in turn affect market integrity and efficiency. This document builds on the findings that are set out in the report, 'The Impact
of Storage and Delivery Infrastructure on Derivatives Market Pricing' (Storage Report), which was published by IOSCO on May 9, 2016.
ISDA published its ISDA 2019 German Bank CDS Protocol (the Protocol) to enable parties to
Protocol Covered Transactions to amend the terms of such Protocol Covered Transactions. The Protocol is relevant for parties that entered into credit derivatives transactions referencing German banks.
Canaccord (formerly Collins Stewart), a second-tier provider of contracts for differences contracted with a broker, Medsted, under which Collins Stewart was required to pay commission to Medsted in respect of investors introduced by Medsted. In breach
of that contract, Collins Stewart did business directly with certain investors, thereby depriving Medsted of the commission to which it was entitled. At first instance the judge found that Medsted suffered loss, but, on public policy grounds,
awarded only nominal damages to Medsted, on the basis that Medsted was a fiduciary which breached its fiduciary duties to the investors by failing to disclose the amount of commission it received from Collins Stewart. The Court of Appeal
found: (a) that Medsted was a fiduciary, but (b) that, in the circumstances of the case, the scope of its duties did not extend so far as to require it to reveal the extent of its commission. It therefore allowed the appeal and made an order
for damages to be assessed.
ESMA Executive Director, Verena Ross, delivered a key note speech at the 7th annual cross-border distribution conference on 12 February 2019. Ms. Ross noted that it is essential to maintain investors’ confidence that the sector is working for them and that
investors are protected no matter where they are based in the EU. She noted that this is where ESMA’s measures to promote investor protection and supervisory convergence are crucial. She noted also that the asset management sector plays,
and will continue to play, a key role ensuring a stable financial system and sustainable growth in the European Union.
The FCA published a research note
reviewing recent academic research on the impact of the growth of passive investing on market efficiency and market effectiveness. The paper suggests that, rather than examining the asset management market from a strictly investor protection perspective,
regulators should design a regime that encourages both active and passive funds to focus more on corporate governance. The paper acknowledges that the growth of passive investing created substantial benefits for investors but argues that active
fund management can also create substantial benefits.
The European Parliament published a briefing which gives an overview
of the state of play of the various work streams on completing the Banking Union, covering both risk sharing (European Deposit Insurance Scheme (EDIS)) and risk reduction measures—this briefing is regularly updated. The briefing sets out
the Capital Markets Union milestones reached so far since the publication of the Five Presidents’ Report on 22 June 2015. On 24 November 2015, the Commission put forward a Proposal on a EDIS presented as the third pillar of the Banking Union
and a Communication ‘Towards the completion of the Banking Union’, which identifies a number of risk reduction measures seen as counterbalancing measures to EDIS. Given the lack of consensus on a number of key aspects of these files,
the EDIS proposal is still being discussed in the European Parliament and in the Council.
The House of Commons Treasury Committee published oral evidence given on 5 February 2019 as part of its inquiry into consumers’
access to financial services. Evidence was given by founder and chief executive of Monzo Bank Tom Blomfield, managing director of Lloyds Bank and Bank of Scotland Community Banks Robin Bulloch, and banking director of the Post Office Martin Kearsley.
The inquiry looks at consumers’ access to financial services and as part of its scope will consider whether vulnerable consumers can access appropriate and affordable credit.
The FCA published proprietary data on the mortgage market, which paint a
picture of an evolving sector. According to the data, the proportion of borrowers who will be aged over 66 when their mortgages mature is on the rise, while the average age of first-time buyers changed very little. Rates of re-mortgaging and lending
to the self-employed are on the rise but remain below pre-crisis levels. In 2015, 26% of all mortgages were due to mature when the borrower was 66 or older. In 2018, that figure had risen to 30%, an increase of almost 411,000 mortgages. In the
great majority of cases (94%) the increase will see the mortgage mature when the borrower is aged between 66 and 70.
Commission Implementing Regulation (EU) 2019/228 of 7 February 2019 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 31 December 2018 until 30 March 2019 in accordance
with Solvency II was published in
the Official Journal.
The European Insurance and Occupational Pensions Authority (EIOPA) published letters dated 1 and 7 February 2019 from the European Commission. The letter dated 1 February 2019 is
a response to EIOPA’s letter of 10 December 2018 on the public consultation concerning the draft delegated act on the review of the Solvency II implementing measures. The letter dated 7 February 2019 requests EIOPA to review the methodology for the activation of the country component of the volatility adjustment under Solvency II.
EIOPA updated its Q&As on the Solvency
II regulation. The new Q&As relate to the templates for submission of information to the supervisory authorities. EIOPA’s Q&As under the same sub-topic include:
Insurance Europe (IE) published an update to its online
consumer focus tool, which outlines examples of the work undertaken by Europe’s insurers to provide innovative products and services for consumers. This tool provides information through an interactive map of Europe that allows users to
click on specific countries to gain insight into insurers’ consumer-focused practices in that particular market. The tool provides examples of initiatives in several important areas, including digitalisation, enhanced claims management and
initiatives to fight insurance fraud.
EU ambassadors endorsed the agreement reached between the presidency and the European Parliament on 13 December 2018 on the proposed
'pan-European pension product' (PEPP). The new regulation now needs to be formally adopted by the European Parliament and the Council before it can enter into force. The draft regulation is aimed at providing greater choice for people who wish
to save for their retirement, whilst boosting the market for personal pensions. According to the European Commission, only 27% of Europeans between 25 and 59 years of age are subscribed to a pension product.
HM Treasury published letters from John Glen to the House of Commons European Scrutiny Committee and
House of Lords European Union Committee providing updates on the proposal for a Regulation
on PEPP. The letters summarise the results of the trilogue negotiations on key aspects of the Regulation (authorisation of PEPPs, the introduction of a charge cap on the basic PEPP product, the tax treatment of PEPPs and a mandatory advice requirement
on PEPPS) and seek clearance for the UK to be able to vote in favour of the final Regulation in Council.
The Council of the EU published an ‘I’ item note on the proposal for a
Regulation on PEPP. Provisional agreement on the text of the Regulation was reached by the Council of the EU, the European Parliament and the Commission on 13 December 2018. The note sets out the final compromise text of the proposed Regulation
and invites the Coreper to approve the agreed text and to confirm that the proposed Regulation may be adopted if approved by the European Parliament in the agreed form.
The Association of British Insurers (ABI) published its
response to the Department for Work and Pensions (DWP) consultation on the consolidation of defined benefit pension schemes. In its response, the ABI warns that allowing these ‘superfunds’ to operate for-profit consolidators under
an untested, light-touch regulatory regime risks playing ‘retirement roulette’ with scheme member benefits. The DWP consultation was launched on 7 December 2018 and closed on 1 February 2019. It sought views on a new legislative framework
for authorising and regulating defined benefit ‘superfund’ consolidation schemes. According to the government, consolidating defined benefit pension schemes into superfund entities so that they benefit from improved funding, economies
of scale and better governance would provide more security for members of some pension schemes.
A new criminal offence of ‘wilful or reckless behaviour’ in relation to pensions will be introduced under proposals to crack down on abuse of final or average salary schemes. The intention to introduce a new criminal offence, and the recommended
maximum sentence of up to seven years’ imprisonment or an unlimited fine, is included in the government’s response to a consultation on enhancing The Pensions Regulator’s (TPR’s) powers. The government consultation on plans to improve TPR’s powers and increase the protections
for defined benefit pension scheme members ran from 26 June 2018 to 21 August 2018.
TPR published a statement
welcoming the DWP’s announcement of new powers for TPR. TPR’s comments follow the publication of DWP’s response to its 2018 consultation on plans to improve TPR’s powers and increase the protections for defined benefit
(DB) pension scheme members. TPR, the UK’s regulator of work-based pension schemes, confirmed that it is working closely with the government to ensure that the new legislation is effective and works in practice.
The European Banking Authority (EBA) published a
new webpage with information on the working group on Application Programming Interfaces (APIs) under the Payment Services Directive (EU) 2015/2366 (PSD2). The working group will be chaired by the EBA and composed of representatives from
a variety of external stakeholders. The working group is composed of an equal number of nine representatives each from Account Servicing Payment Service Providers, Third Party Providers, and API initiatives respectively, and a smaller number of
other representatives from standardisation bodies, technical service providers and payment service users.
The Payment Systems Regulator (PSR) launched a consultation
on its proposed approach to analysing how the level of fees that merchants pay for card-acquiring services responded to changes in interchange fees and scheme fees, as part of its market review into the supply of card-acquiring services. The deadline
for comments is 1 March 2019. The final terms of reference (ToR) of the PSR’s market review were published on 24 January 2019. The ToR state that the PSR will examine how the level of the fees merchants pay for card-acquiring services responded
to changes in the fees acquirers pay to card system operators (scheme fees) and card issuers (interchange fees).
During a Treasury Committee evidence session held today, the Chair of the PSR, Charles Randell, said that the whole system of access to cash needs to be looked at afresh, and that the PSR board will indeed look at the entire infrastructure of
cash provision. Mr Randell’s comments came in response to Rt Hon. Nicky Morgan MP’s request for information on the future of the UK’s ATM network. Mr. Randell noted that because changes to the way people use cash and contactless
payments affected the economics of the cash distribution industry, there should be a debate within the industry in 2019 about whether access to cash should be a universal service, rather than a commercial one.
The government must appoint a new regulator to protect the interests of more than 25 million people who rely on cash, a consumer group said, warning that bank branch and cashpoint closures could leave customers struggling to pay their bills. Which? warned that consumers could be shut out of paying for goods and services unless
the UK takes regulatory action to prevent the country moving further toward becoming a cashless society. A new watchdog, with responsibility for overseeing the cash infrastructure, could manage changes to bank branches and intervene when ATMs
close, the consumer champion recommended. Data collected by Which? reveals that 488 cashpoints disappeared every month between June and December 2018.
Innovate Finance, the independent membership association representing the UK’s global FinTech community, reported that investment in the UK FinTech sector rose by 18% to $3.3b in 2018. The report showed that the UK’s FinTech sector retained its position as a world leader, ranked third globally in venture
capital investment behind China and the US, and continued to dominate in Europe. The 2018 FinTech VC Investment Landscape Report, published by Innovate Finance, showed that London continued to be the UK’s preeminent centre for FinTech and
suggested that the sector would need to consider how to increase its reach across the UK to tap into the competitive advantage of the wider UK economy.
The Bank of International Settlements (BIS) published details of a lecture given by Mr Hyun Song Shin, Economic
Adviser and Head of Research of the BIS, at the University of Cambridge, 22 January 2019. In the lecture, Mr Shin uses global game theory to analyse decentralised payment systems built around blockchain technology. Mr Shin notes payment systems
built around distributed ledger technology (DLT) operate by maintaining identical copies of the history of payments among the participant nodes in the payment system. Payment systems based on DLT are compatible with oversight by the central bank,
and several central banks conducted successful trials of interbank payments.
The International Organisation of Pensions Supervisors (IOPS) launched a public
consultation on its draft supervisory guidelines on the integration of environmental, social and governance (ESG) factors in the investment and risk management of pension funds. The consultation is open for feedback until 11 March 2019. IOPS is
an independent international standard-setting body representing those involved in the supervision of private pension arrangements. Formed in 2004, and supported by the OECD, IOPS 87 members and observers represent 75 jurisdictions and territories
14 February 2019
Markets and trading
The deadline for responses to ESMA’s consultation on future guidelines for money market funds’ disclosure
is 14 February 2019.
Trilogue negotiations between the Council of the EU and the European Parliament in relation to proposals to amend the ESFS are scheduled to begin on 14 February 2019.
The deadline for responses to the PSR consultation ‘19/1—Draft Specific Direction 4—Competitive procurement of central infrastructure’
is 15 February 2019.
The deadline for applications to
join the European Payments Council’s new Request-To-Pay Multi-Stakeholder Group is 15 February 2019.
The deadline for responses to the ICE Benchmark Administration’s
survey on the use of LIBOR currencies and tenors to inform its work in seeking the support of globally active banks for the publication of certain LIBOR settings after year-end 2021, is 15 February 2019.
The transparency requirements for bonds deemed liquid (under ESMA’s bond liquidity assessments) on 31 October 2018 will expire on 15 February 2019.
The deadline for EEA data reporting services providers (DRSPs)
authorised under MIFID to let the FCA know that they wish to provide data reporting services in the UK after the 29 March 2019 is 15 February 2019.
ESMA will publish double volume cap (DVC) data (as required under MiFIR and originally expected to be published on 7 February 2019) on 15 February 2019.
The transparency requirements for bonds deemed liquid (under ESMA’s bond liquidity assessments) on 1 February 2019 will apply from 16 February 2019.
The European Central Securities Depositaries Association (ECSDA) published the updated draft version of the
ECSDA CSDR Penalties Framework. This updated draft Framework may be subject to changes and will be presented and discussed with main stakeholders on 18 February 2019 in Frankfurt, Germany.
The deadline for feedback to FCA ‘CP18/44: Brexit – Regulatory Technical Standards for Strong Customer Authentication and Common and Secure Open Standards of Communication’
is 19 February 2019.
The deadline for responses to ESMA’s consultations on ‘Integrating sustainability risks and factors in the UCITS Directive and AIFMD’ and ‘Integrating sustainability risks and factors in MiFID II’ is 19 February 2019.
settlement fails reporting,
standardised procedures and messaging protocols
is 20 February 2019.
The deadline for responses to EIOPA’s call for input on
Solvency II reporting and disclosure requirements as part of the 2020 Solvency II review is 21 February 2019.
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